1. Field of the Invention
The present invention relates generally to transaction processing systems. More specifically, the present invention relates to a transaction architecture that eliminates paper as the means of memorializing a transaction, replacing it with an e-transaction that is enforceable, automated, auditable, secure, and private.
2. Description of Related Background Art
The use of paper documents in transactions costs U.S. industries billions of dollars annually. In 2001, the life, health and annuity segments of the U.S. insurance industry issued over 25 million new policies, with total premiums of over $442 billion. Insurance regulations require that policy packets delivered to a customer contain a signed application and a signed illustration of the policy. Furthermore, the applicant is required to sign an authorization to allow an insurance company to obtain health and financial information. This is a costly and time-consuming process and is made more difficult by the risk of non-compliance with new personal health and financial information privacy requirements.
Currently, the cost of processing a life insurance application from beginning to end averages $300 per application, with costs fluctuating lower or higher depending on the complexity of the underwriting process. The majority of these costs are incurred whether an applicant completes the process, and are largely the result of printing, mailing, and reviewing paper documents.
The industry average time from customer application until policy issuance is 45 days. After the first two weeks, customer drop-off rates caused by the delays in issuing new policies are approximately 1% per day. Overall policy loss is approximately 30% of all applications submitted. Much of the delay is caused by the mailing of paper documents between various parties.
Insurance is only one industry that is negatively impacted by the use of paper documents to memorialize transactions. Many other industries would benefit from a technique for eliminating paper documents from a transaction, while still ensuring enforceability, security, and privacy.